Tips for Surviving – And Thriving – In Lean Times
Can you think of a more hard-hitting consumer issue than the cost of food? Whether feeding an entire household or just ourselves, most of us have never seen prices spike and remain as high as we do at the grocery store and at restaurants. If you are in the food and beverage industry, how can you best prepare for price pressures and stay competitive throughout 2023?
How Can Your Business Not Just Survive, but Thrive?
As advisors to businesses in this consumer-critical space, we can’t so much read the tea leaves as we can provide support and guidance to help get your through 2023 in as strong a position as possible. We discuss factors that are having a sizable impact on the industry as a whole while providing practical, simple yet high-yielding results for operation costs and preparing for changes in consumer preferences.
With consumer prices for food at home having jumped some 13.5% as of the end of August 2022 since the same time in 2021 (according to the Bureau of Labor Statistics) and having not leveled off in any significant matter by year-end, it’s prudent to consider these steps. That 13.5% rate was, remarkably, the largest 12-month percentage increase since the period ending March 1979. In that same timeframe, the cost for food at restaurants increased by 8%, which rivaled the largest jump since October 1981.
Contain Your COGS
While it may, at times, feel out of your hands, there are always opportunities to control the costs of goods sold (COGS) in your food or beverage company. No matter the season or cycle, you no doubt already have been tracking beginning, purchased, and ending inventory to calculate COGS. But you can also take simple steps to adjust the outcome.
For example, you can make it a rule to buy in bulk or to purchase in cycles that are not dependent on supply chain pressures. When buying in bulk, be mindful of your storage capacity to avoid any potential spoilage. The math might point to buying more in certain seasons, for example, as weather creates more auspicious storage capacity. Depending on your type of food or beverage business, we can suggest on-point, practical ways to adjust the COGS in your favor.
As well, you probably want to take a new look at your vendors. Long, established relationships don’t always mean you are getting the best value for your spend. You might want to meaningfully compare your vendors and/or procurement cycle to validate any assumptions you made in prior years. Particularly in the most recent three years – marked by high volatility and supply chain disruptions and backlogs – you are best served in 2023 by reevaluating, deeply, the strength, quality, and value that each vendor offers.
And as consumer preferences change over time – and sometimes, seemingly, by the season or in such remarkably short cycles as the latest TikTok video – we can help you spot coming trends so you can prepare for them ahead of the curve. Doing so could mean creating new supplier relationships, planning for more warehousing, or making tweaks to your brand, as a few examples.
Put Actual Service Back Into Customer Service
A seemingly obvious but all too rare way to differentiate your company among your competitors, whether local or globally online or in brick and mortar presence, is through service. We hear all too often that the days of good service are in the rear view.
What constitutes good service or the perception thereof? A short list would include demonstrating authentic care and concern, attentiveness (that is, using active listening), congeniality and having authentic interactions. These factors hold as true for servers in a restaurant as it does for distributors of beer and wine. Your clients or customers feel authenticity when your employees demonstrate presence that can be seen. That means not looking at their phone, seeming bored or, worse yet, in any manner bothered by a customer or client interaction. It means engaging with the customer directly, without distraction, looking each in the eyes and greeting each with a genuine smile or kind word. The more present your employees are with the buying public, the better the quality of service will be perceived.
Improve Employee Experiences
It costs more to hire than to retain, and above is not a typo. We write “experiences,” not “experience,” because your employees have different experiences throughout the time they spend in your organization. There’s the discreet period of hiring and onboarding, then learning the day-to-day tasks and the sometimes disparate systems to achieve them, and recognition, rewards, and how time off is accrued or holidays and milestones are not just recognized but honored. Even the level of respect between and among all parties at separation (whether it’s due to retirement, moving on, termination, or layoff) plays to yet another experience, and one that will last well beyond the employee’s tenure.
A significant part of the art of employee retention is providing an environment in which each can thrive and feel pride. Experiences, when handled correctly and whether individually or taken as a whole, are what create loyal employees. The more stable your employee base, the less likely you’ll have to endure the high cost of hiring, training, and retaining new workers.
Behind every successful enterprise is a sound business structure that includes business management, accounting, audit and tax. Weaver professionals are deeply experienced serving clients in all segments of the food, beverage, and hospitality industry. We are here to help your business not just survive but thrive in lean, volatile, or otherwise challenging times. Contact us today.
Authored by Thomas Morris, CPA.